Vested interests and technology adoption

The asymmetric ability of different interest groups to exclude non-members and the concentrated benefits and diffused costs of policies favoring vested interests matters for technology adoption. We analyze a political economy model where coalitions of workers in many small industries lobby government for a prohibition on the adoption of superior technologies. For reasonable parameter values, the ‘‘smallness’’ of industry lobbies leads to barriers to the adoption of technologies that would make all workers more productive. Higher government corruption can lead to lower levels of TFP and per capita output. The model can generate TFP growth cycles. r 2006 Elsevier B.V. All rights reserved